US Air May Draw More
Bidders for Reorganization
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
May 31, 2005
A bankruptcy court decision expected as early as today could allow other bidders to compete to fund a reorganization plan for US Airways Group Inc., which already has agreed to merge with America West Holdings Corp.
US Airways is asking Judge Stephen Mitchell of the U.S. Bankruptcy Court in Alexandria, Va., to establish procedures so other qualified entities can submit rival proposals that would facilitate a plan of reorganization allowing US Airways to step out of Chapter 11. US Airways has said the proposed merger is the best option available. But such competitive bidding arrangements are common in bankruptcies, and US Airways cited caution and an opportunity for another potential transactions to surface.
A rival bid for the entire airline is unlikely, given that US Airways has been shopping itself unsuccessfully for years. But other investor groups could try to knock out the five that are putting up the $500 million in new equity. And other airlines could make selective bids for gate leases at constrained airports, lucrative landing slots in Washington and New York or the US Airways Shuttle. "Asset sales proposals ... are not preferred but may be entertained," US Airways said in the motion seeking competitive bids.
New investor groups have expressed interest, according to a person familiar with matter, though alternative bids aren't certain. Also, investors that considered getting into the America West deal may circle back, people familiar with the situation said. They include Wexford Capital LLC, a private-equity and hedge fund that controls regional carrier Republic Airways; Mesa Air Group Inc., another regional carrier that flies for America West; and Retirement Systems of Alabama, a state pension fund that helped fund US Airways' exit from its first bankruptcy and now is the airline's largest shareholder.
Wexford didn't respond to calls seeking comment. RSA also has declined to comment.
Southwest Airlines Chief Executive Gary Kelly recently said his company wouldn't buy US Airways but might be interested in certain assets. A spokesman for AMR Corp.'s American Airlines said "we would be remiss if we didn't examine any possibilities that would be beneficial to us." JetBlue Airways said recently that it has bolstered its cash balance in case gates and slots become available.
Some airlines may be hoping something happens to unravel the merger with America West and put US Airways out of business, so as to ease cutthroat pricing by removing seats from an oversupplied industry. At the least, alternate proposals could pressure some investors in the proposed merger to sweeten offers.
Judge Mitchell may look askance at proposals to buy selected assets if they threaten to scuttle the merger, said Roger King, an analyst for independent research firm CreditSights. Asset buyers, he said, "are going to have to make a compelling case that the combined net value for all the parts is worth more than the value of the merged entity."
Bidders for Reorganization
By SUSAN CAREY
Staff Reporter of THE WALL STREET JOURNAL
May 31, 2005
A bankruptcy court decision expected as early as today could allow other bidders to compete to fund a reorganization plan for US Airways Group Inc., which already has agreed to merge with America West Holdings Corp.
US Airways is asking Judge Stephen Mitchell of the U.S. Bankruptcy Court in Alexandria, Va., to establish procedures so other qualified entities can submit rival proposals that would facilitate a plan of reorganization allowing US Airways to step out of Chapter 11. US Airways has said the proposed merger is the best option available. But such competitive bidding arrangements are common in bankruptcies, and US Airways cited caution and an opportunity for another potential transactions to surface.
A rival bid for the entire airline is unlikely, given that US Airways has been shopping itself unsuccessfully for years. But other investor groups could try to knock out the five that are putting up the $500 million in new equity. And other airlines could make selective bids for gate leases at constrained airports, lucrative landing slots in Washington and New York or the US Airways Shuttle. "Asset sales proposals ... are not preferred but may be entertained," US Airways said in the motion seeking competitive bids.
New investor groups have expressed interest, according to a person familiar with matter, though alternative bids aren't certain. Also, investors that considered getting into the America West deal may circle back, people familiar with the situation said. They include Wexford Capital LLC, a private-equity and hedge fund that controls regional carrier Republic Airways; Mesa Air Group Inc., another regional carrier that flies for America West; and Retirement Systems of Alabama, a state pension fund that helped fund US Airways' exit from its first bankruptcy and now is the airline's largest shareholder.
Wexford didn't respond to calls seeking comment. RSA also has declined to comment.
Southwest Airlines Chief Executive Gary Kelly recently said his company wouldn't buy US Airways but might be interested in certain assets. A spokesman for AMR Corp.'s American Airlines said "we would be remiss if we didn't examine any possibilities that would be beneficial to us." JetBlue Airways said recently that it has bolstered its cash balance in case gates and slots become available.
Some airlines may be hoping something happens to unravel the merger with America West and put US Airways out of business, so as to ease cutthroat pricing by removing seats from an oversupplied industry. At the least, alternate proposals could pressure some investors in the proposed merger to sweeten offers.
Judge Mitchell may look askance at proposals to buy selected assets if they threaten to scuttle the merger, said Roger King, an analyst for independent research firm CreditSights. Asset buyers, he said, "are going to have to make a compelling case that the combined net value for all the parts is worth more than the value of the merged entity."
